Advantages and Disadvantages of a Mid-Term Business Loan
Medium-term loans are referred to be the loans that work similarly to both short-term business loans and long-term business loans. In short, this is a hybrid of the above and underlying business loans available. Medium-Term Loans are available with repayment conditions for a definite period between two and five years.
Whether you are dreaming about initiating your small business or have already launched your new company, you are more likely to acquire financing for your business to reach the benchmark of your small business goals.
If you are a dedicated and savvy small business owner, then you might even have done your research on the types of business loans that are available in the market. But you must clearly bear in mind that the duration lies somewhere in between the long-term business loan and short-term business loans.
What Medium-Term Business Loans Offer?
Usually, a medium-term loan offers up financing of $25,000 to $500,000 on a monthly payment schedule. They typically carry mid-market interest rates, it is easy to secure, and these loans typically take two to three weeks to get funding via the medium-term loan.
Let us have a quick sneak-peak into the working of Medium-Term Loans.
How Does Medium-Term Business Loans Work?
Medium-term loans work similarly to short-term business loans and long-term loans, with the main difference obviously being their repayment time frame. In addition to the time frame of this particular and peculiar kind of loan, medium-term loans also differ in the interest rates and qualification criteria.
What Are the Repayment Terms for Medium-Term Loan?
The conditions for medium-term loans vary from lender to lender, but most commonly, medium-term loans are defined as loans with a repayment period ranging from two to five years.
In comparison to other loans, short-term loans are repaid within a short span of two years, and long-term loans are paid off within 10 to 20 years.
Usually, borrowers must make payments on a medium-term loan every month or twice a month. Medium-term loans are available both from banks and alternative online lenders.
What Are the Costs of Availing a Medium-Term Loan?
Well, the interest rates vary from lender to lender, the rates largely depend upon the lender, so it is crucial to look out for the lender who will make things work out for you. A crucial question of why medium-term loans is preferable for your small business, if you are going to avail of the medium-term loans by BitX Funding, then you typically have interest rates less than 20%.
Looking other than BitX Funding then Medium-term loans from alternative online lenders and conventional lenders typically charge interest rates ranging from 7% to 30%.
An important point to consider- Interest rates expend on your repayment schedule as well, if you are going to pay off the medium-term loan every month, then the interest rate would be compound monthly.
Medium-Term Loan Are Ideal for Growing Businesses
Medium-term loans are best suited and ideal for growing, revenue-positive businesses with a need to acquire capital to further expand.
Alternative ways: If you have a newer business or are struggling to boost up your credit, then a short-term loan could be the best option to opt for. If you want to make a significant purchase, for example, larger purchases like buying a new place, long-term loans, such as SBA loans, are your best bet.
How Can You Use Medium Term Loans?
You can use Medium Term loans to purchase new equipment, inventory, and household supplies, rent out a new location, or hire more talent.
Advantages and Disadvantages of Medium-Term Loans
Medium-term loans can be the answer to the quick funding your business needs. But it holds for medium-term loans that they are not ideal for everyone.
Let us dive into the medium-term loan’s advantages and disadvantages:
Advantages of Medium-Term Loans
- Fixed Interests Rate- Medium Term loans give you an option to set a fixed interest rate for your loan. Medium Term Loan helps a business owner to know precisely what that loan is costing them over time.
- Improved Credit Score- Receiving and successful repayment of a medium-term loan will boost up your credit score and help you build business credit.
- Can be used for a Variety of Purposes- You can use these loans for a variety of business purposes.
- Adorns with the Option for Regular Payments- You can set monthly and bi-monthly payments for the repayment of medium-term loans.
Disadvantages of Medium-Term Loans
- Long Application Process- Medium-term loans require more paperwork as compared to other loan applications. These loans have a longer turnaround than short-term loans. But still, they are quick to get.
- Hard to Qualify- As these loans require collateral, so good credit or cash flow is crucial to qualify for the criteria of medium-term loans
BitX Funding is the online marketplace for small business owners looking to fund a project. We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and we are passionate about helping your company reach its full potential.
You can reach a loan specialist by toll-free at 1-800-824-2407, or email at firstname.lastname@example.org, or apply online here and we can guide you on which loans are the best fit for your business.